Rupee little changed due to Fed uncertainty and poor Asian FX

While Asian counterparts continued to decline, the Indian rupee finished Tuesday with little change as traders awaited new signals before placing significant wagers. As opposed to 81.9050 in the previous session, the rupee ended the day at 81.9125 to the dollar. Traders cited public sector bank-led dollar bids near 81.90-levels as the reason why additional advances were restrained, and the currency maintained an 11-paisa range throughout the day.

Those offers might have been for importers like oil corporations, but overall trading activity has remained slow, according to two private bank dealers. Market participants have suggested that the Reserve Bank of India may be present as the USD/INR pair has been unable to go beyond the 81.80–81.90 range in recent days.

Anindya Banerjee, Kotak Securities’ head of research for foreign exchange and interest rates, stated that momentum in the USD/INR pair “remains elusive.”Going into the May 2-3 U.S. Federal Reserve meeting, volatility has decreased, but it may spike again following the meeting. “There is always a chance that the Fed will shock the market by pausing its rate hikes instead. If so, the U.S. dollar could decline following the conference. As risk sentiment remained subdued, Asian currencies like the South Korean won and the Chinese yuan fell by approximately 0.30 percent on Tuesday.

New concerns about the state of domestic lenders and declining U.S. bond yields made it difficult for the dollar index to make significant gains. The sharp decline in deposits announced by First Republic Bank in the US overnight served as a reminder that stability threats have not completely subsided and caused markets to raise expectations that the Fed will rapidly switch from boosting to cutting rates.

To determine the path of the Fed’s policy, the markets are currently awaiting statistics on the U.S. March quarter GDP and the monthly personal consumption price index, both of which are expected in the second part of this week.

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